Case Law Details
Kunvarji Fincorp Pvt Ltd Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad, in the case of Kunvarji Fincorp Pvt. Ltd. Vs Deputy Commissioner of Income Tax held that denial of Tax Deducted at Source (TDS) credit due to the assessee’s mistake or misunderstanding is impermissible. The case emphasizes the importance of fairness and adherence to the statute when it comes to tax collection.
The crux of the dispute was that Kunvarji Fincorp Pvt. Ltd., a Non-Banking Financial Company (NBFC), failed to claim a refund on the TDS credit while filing its income return. The assessee argued that this omission was inadvertent and sought a rectification, which was rejected by the Computerized Processing Cell (CPC) and subsequently by the Commissioner of Income Tax (Appeals).
However, the tribunal, invoking the Gujarat High Court’s decision in the S.R. Koshti Vs. CIT case, asserted that “Tax can be collected only as provided under the Act” and that any over-assessment due to the assessee’s mistake or misunderstanding needs rectification. The tribunal thereby directed the assessing officer to grant the TDS credit benefit to the assessee.
The decision reiterates the importance of ensuring fair and proper application of tax laws. Tax authorities are required to assist assessees and ensure that only legitimate taxes are collected, regardless of any mistakes or misconceptions by the assessee. This case sets a vital precedent for the consideration of human errors in tax procedures.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-2, dated 24/01/2020 Ahmedabad, arising in the matter of assessment order passed under s. 154 of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2012-2013.
2. The only issue raised by the assessee is that the learned CIT(A) erred in not granting the refund of TDS credit of Rs. 11,89,444/- only.
3. The facts in brief are that the assessee in the present case is a NBFC and engaged in the business of financing against stock and commodities. The assessee in the year under consideration filed return of income under section 139 of the Act dated 11-09-2012 declaring loss at Rs. 40,56,081/- only. There was credit of tax deducted at source for Rs. 11,89,444/- which was inadvertently not claimed as refund in the return filed under section 139 of the Act. However, the return of the assessee was processed under section 143(1) of the Act dated 21-02-2013 accepting the loss at Rs. 40,56,081/- only without grating the refund of the tax credit reflecting in form 26AS by the computerized processing cell (CPC).
3.1 The assessee filed an application under section 119(2)(b) of the Act before the ld. PCIT-2 Ahmedabad dated 23-05-2016 for allowing the belated claim of refund of the TDS. However, the learned PCIT vide order dated 03-11-2016 rejected the application of the assessee by holding that case of the assessee was not covered under the provision of section 119(2)(b) of the Act.
3.2 Subsequently, the assessee e-filed rectification application under section 154 of the Act dated 17-02-2017 before the CPC which was also rejected by the CPC stating the reason that the issue has been assigned to the jurisdictional AO. Thus, the assessee vide letter dated 16th April 2018 filed rectification application under section 154 before the AO. But the AO rejected the application of the assessee by holding that the application of refund by the assessee has already been dismissed by learned PCIT. Therefore, no further action can be taken.
4. Aggrieved assessee preferred an appeal before the learned CIT(A) who dismissed the same by observing as under:
On perusal of relevant facts on record, it is observed that issue of allowable TDS credit is already decided by PCIT-II, Ahmedabad, in his order referred supra. The appellant has not challenged such order before higher authorities. Once higher authority has already rejected such claim made by appellant, AO has correctly denied TDS credit relying upon order referred supra. Thus, appellant is not entitled for such TDS credit, as claimed in Rectification Application. On this fact both the grounds of appeal are dismissed.
5. Being aggrieved by the order of the AO, the assessee is in appeal before us.
6. The learned AR before us contended that the assessee should be allowed the benefit granted under the statute. As such the assessee should not be made to suffer on account of the mistake committed by it.
7. On the other hand, the learned DR before us contended that the assessee has not challenged the application rejected under the provisions of section 119(2)(b) of the Act. Thus, the assessee should not be given the benefit of the TDS credit. The learned DR vehemently supported the order of the authorities below.
8. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the assessee can claim the benefit of the TDS which was not claimed in the return of income inadvertently in the given facts and circumstances. In this regard, we note that the Hon’ble Gujarat High Court in the case of S.R. Koshti Vs. CIT reported in 276 ITR 165 has held as under:
20. A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. This Court, in an unreported decision in case of Vinay Chandulal Satia v. N.O. Parekh, CIT [Spl. Civil Application No. 622 of 1981 dated 20-8-1981], has laid down the approach that the authorities must adopt in such matters in the following terms:
“The Supreme Court has observed in numerous decisions, including Ramlal v. Rewa Coalfields Ltd. AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah Municipality AIR 1972 SC 749 and Babutmal Raichand Oswal v. Laxmibai R. Tarte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technica l grounds. The State authorities cannot adopt the attitude which private litigants might adopt. “
8.1 From the above it is revealed that the income of the assessee should not be over assessed even if there is a mistake of the assessee. As such the legitimate deduction for which the assessee is entitled should be allowed while determining the taxable income. We also note that the Hon’ble Gujarat High Court in the case of Vareli textile industry versus CIT reported in 154 Taxman 33 wherein it was held as under:
It is equally well-settled that where a cause is consciously abandoned (as in the present case) the party seeking condonation has to show by cogent evidence sufficient cause in support of its claim of condonation. The onus is greater. One of the propositions of settled legal position is to ensure that a meritorious case is not thrown out on the ground o f limitation. Therefore, it is necessary to examine, at least prima facie, whether the assessee has or has not a case on merits.
8.2 In the light of the above discussion, we note that the assessee should not be deprived of the benefit of the TDS credit which was inadvertently not claimed in the return of income. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to allow the benefit of the TDS credit as per the provisions of law. Hence the ground of appeal of the assessee is allowed.
9. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Court on 02/05/2023 at Ahmedabad.
